Notes From The Editor

I remember several years ago when three mountain bikers were air lifted to safety in a rescue helicopter after getting lost in the San Bernardino National Forest. The next day they decided to go back into the woods and get their bicycles. Unfortunately, the three young men got lost and had to be rescued ... again!

Although this sort of behavior may seem bizarre, it's quite common among traders and investors. No, we rarely get lost in the woods twice in twenty-four hours, yet many of us continue to repeat the same mistakes over and over again. When it comes to trading the markets, losing money rarely results from what others do to us. Problems usually come up because of what we do to ourselves.

I suppose we all have blind spots in our trading field of vision - things that we just don't see because of our psychological makeup. Most new traders have little or no training in the markets, yet still expect to be successful without anyone to guide them. Experienced traders know that rules are important, so we set rules and then we break them.

The reasons for "dim-witted" behavior are embedded deep in our brains. Today's actions are largely the result of early childhood conditioning that established habits and beliefs long before we even knew what they were. As young children we were unaware to how silly we probably looked to our older friends and family when we tried to avoid responsibility for our actions.

It always seemed like a good idea at the time, though now we can see that maybe it wasn't. In the same way, our current trading behavior always seems the right thing to do - at least at the time we do it.

"Oh, the market did that to me" is just another way of saying "I'm a big part of the reason it happened." Have you ever noticed how most investors are reluctant to admit that they are responsible for their losses, yet they seem proud of their gains?

At first glance it seems natural to be ashamed of our mistakes and proud of our accomplishments. However, our blunders usually teach us much more than our achievements - if we are willing to learn from them. The only truly bad mistakes are the ones that we deny. It takes courage to own up to them, much less accept them as valuable learning experiences to be embraced.

The good news is that we can change our old habits and beliefs by taking responsibility - even when it hurts. A trading mistake can cost quite a bit in terms of cash, so it's always wise to get at least the same amount of value in experience. Just remember that bad judgment leads to experience, and experience leads to good judgment.

Trade well!

~ Thomas Sutton, Editor

Quick List

    
Stock     08/01     08/01      Buy      Short   Trailing Stops     Gain 
Symbol    Price      +/-      Entry     Entry   Initial/Tighten   Amount 
------  --------  --------  --------  --------  ---------------  --------

VITL      36.51      0.02     37.66     34.75        2.91/1.46      3.72
IMVT      28.87     -0.20     29.89     27.64        2.25/1.13      2.82
CLDX      37.55     -0.56     39.09     36.05        3.04/1.52      3.38
HURN     112.35      2.34    115.06                 10.75/5.38      4.44
SATS      19.95     -0.13     20.48                   1.79/0.9      1.34

The "Quick List" provides a brief summary of each stock write-up and should be taken in the context of the related write-up presented in the "Stocks Covered in This Issue" section of this Report.

Be sure to read "How To Use The RightLine Quick List" and always use the RightLine Risk Control Calculator before entering any position.

For more on controlling risk go to the RightLine Risk Control System

For a glossary of terms unique to The RightLine Report go to: Glossary

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Market Summary

After opening the day higher, stocks reversed course and closed sharply lower on Thursday, driven by a weaker-than-expected ISM Manufacturing report. The headline manufacturing index fell to 46.8 in July, below the anticipated 48.9, marking the fourth consecutive month of contraction. This disappointing manufacturing data, coupled with a rise in initial jobless claims, heightened concerns about economic growth, prompting a risk-off move in the markets. Defensive sectors, such as consumer staples, health care, and utilities, outperformed, while growth sectors like technology and consumer discretionary, along with small-cap stocks, lagged.

On the corporate front, Meta's shares gained over 4% after reporting better-than-expected revenue and earnings for the second quarter. So far, about 68% of S&P 500 companies have reported second-quarter earnings, with roughly 78% surpassing expectations. Internationally, Asian markets declined following a weaker-than-expected manufacturing report from China, and European markets closed lower after the Bank of England cut its policy rate from 5.25% to 5%. Soft economic data led to lower bond yields, with the 10-year Treasury yield closing below 4% and the 2-year yield dropping to 4.16%.

This week's economic data included labor productivity for the second quarter, initial jobless claims, and the ISM Manufacturing PMI. Nonfarm business-sector labor productivity increased by 2.3% quarter-over-quarter, surpassing expectations of 1.8% and rising from 0.4% in the first quarter. This productivity boost resulted in a 0.9% increase in unit labor costs, lower than the expected 1.7% rise. Initial jobless claims for last week reached 249,000, exceeding expectations of 235,000 and marking the highest reading this year. Despite this increase, jobless claims remain below the 20-year median of over 300,000.

The ISM Manufacturing PMI fell short of expectations, indicating that higher interest rates are continuing to impact the manufacturing sector. The employment subindex declined to its lowest level since 2020. Overall, the data suggests continued moderation in economic growth, inflation, and labor-market conditions, which may support Fed rate cuts in the coming months.

July Performance Recap: Equity markets saw gains in July, with the S&P 500 rising just over 1%, marking its eighth monthly gain in the past nine months. The real estate, utilities, and financials sectors led the S&P 500 higher, while the technology and communication services sectors, which have driven much of the year-to-date gains, finished lower. U.S. small-cap stocks stood out, with the Russell 2000 Index gaining over 10% for the month, its best monthly performance since December. The 9% outperformance of U.S. small-caps relative to large-caps in July was the largest since February 2000. Mid-cap stocks also performed well, with the Russell Mid-cap Index up 4.7%. The strong performance of small- and mid-cap stocks relative to large-caps was driven by moderating inflation and healthy economic growth. Internationally, developed and emerging-market stocks finished higher, with the MSCI EAFE Index gaining nearly 3% and the MSCI EM Index rising by less than 1%. On the fixed-income side, U.S. investment-grade bonds benefited from a drop in yields, with the Bloomberg US Aggregate Bond Index gaining over 2% for the month.

                        Jul 31, 2024           Aug 1, 2024    
                  --------------------   --------------------
Dow                 40,842.79    99.46     40,347.97  -494.82
Nasdaq              17,599.40   451.98     17,194.15  -405.25
S&P 500              5,522.30    85.86      5,446.68   -75.62

NYSE Volume                      4.56B                  4.72B
NYSE Advancers                   1,762                    927
NYSE Decliners                   1,049                  1,896

Nasdaq Volume                    6.32B                  6.69B
Nasdaq Advancers                 2,572                  1,008
Nasdaq Decliners                 1,634                  3,244

                                 New Highs/Lows

                   07/25  07/26  07/29  07/30  07/31  08/01
                 --------------------------------------------
NYSE New Highs       178    214    179    218    369    208
NYSE New Lows         29     17     14     25     21     53
Nasdaq New Highs     214    243    162    176    284    107
Nasdaq New Lows      108     69     91    140     98    178
   

TRADER'S TIP: "What If I Had A Crystal Ball?"

You don't need a crystal ball if you prepare for each trade with the "what if" approach. Always remember to ask these questions before entering any position - "What will I do if price moves in my favor?" And "What will I do if price moves against me?" Most traders and investors never consider these questions at all, so simply writing down specific answers will put you way ahead of the game.

The Technical Analyst

For help with this chart, be sure to read "Understanding The Importance Of Support And Resistance"
and "Improve Your Trading With Moving Averages".

Market Calendar

ECONOMIC REPORTS AND EVENTS (all times are Eastern):    

MONDAY, JULY 29	
None scheduled
				
TUESDAY, JULY 30					
9:00 am	S&P Case-Shiller home price index
10:00 am	Consumer confidence	
10:00 am	Job openings

WEDNESDAY, JULY 31					
8:15 am	ADP employment	
8:30 am	Employment cost index	
9:45 am	Chicago Business Barometer (PMI)	
10:00 am	Pending home sales			
2:00 pm	FOMC interest-rate decision				
2:30 pm	Fed Chair Powell press conference
				
THURSDAY, AUG 1					
8:30 am	Initial jobless claims	
8:30 am	U.S. productivity	
9:45 am	S&P U.S. manufacturing PMI	
10:00 am	ISM manufacturing	
10:00 am	Construction spending	

FRIDAY, AUG. 2					
8:30 am	U.S. employment report	
8:30 am	U.S. unemployment rate	
8:30 am	U.S. hourly wages	
8:30 am	Hourly wages year over year		
10:00 am	Factory orders

For a chart of typical Up or Down market reactions to specific major US economic reports 
go to:  Economic Indicator Effects

TRADER'S TIP: "Playing The Game To Win"

Knowledge is power in the stock market - a game unlike any other. You are allowed to switch sides at will, and even step inside the opponent's huddle before making the change. Professional investors, market makers, and floor specialists do it all the time - it's a part of their regular routine. Remember that trends can and often do change direction. To take advantage of "the trend" requires that we know how to trade with the trend, no matter which way it goes.

Stocks Covered in This Issue

CONSUMER DEFENSIVE SECTOR

Vital Farms, Inc. (VITL: Consumer Defensive/Farm Products) - SQUEEZE PLAY. In certain stocks a tightly constricted price range is a sign that neither bulls nor bears are confident of winning in the near term. This often means that the side that gives up first causes a quick move in the opposite direction. In these fear dominated skirmishes, opposing traders always benefit from the retreat. In the Squeeze Play setup you can actually play both sides of the inevitable surge. VITL traders reached this state of stand-off on Thursday with the tightest range of the past seven days. You can take advantage of their efforts by placing a low risk BUY trigger at 37.66 and a SELL short trigger at 34.75. After one of the two orders is filled, cancel the un-triggered order and place a trailing stop at 2.91 which can be tightened to 1.46 on a 3.72 gain. VITL closed Thursday at 36.51. Earnings Report Date: Aug 8, 2024. Beta: 0.98. Market-Cap: 1.54B. Optionable.

HEALTHCARE SECTOR

Immunovant, Inc. (IMVT: Healthcare/Biotechnology) - SQUEEZE PLAY. The struggle between buyers and sellers has resulted in IMVT's narrowest trading range of the past seven sessions. With neither group able to take complete control on Thursday, the stock's short term destiny is up for grabs. You can capitalize on this unusually tight condition by placing both a BUY order at 29.89 and a SELL order at 27.64. Regardless of which order is triggered, cancel the other one and follow your entry with a 2.25 trailing stop. Tighten the stop to 1.13 once you have a 2.82 gain. IMVT closed Thursday at 28.87. Earnings Report Date: Aug 8, 2024. Beta: 0.71. Market-Cap: 4.22B. Optionable.

Celldex Therapeutics, Inc. (CLDX: Healthcare/Biotechnology) - SQUEEZE PLAY. CLDX traders on both sides of the fence are now locked in a head-to-head shootout. Thursday's price range was the narrowest in over a week, as neither Bears or Bulls have been able to clearly gain the upper hand. This gives us an opportunity to catch the next directional move with little risk of loss. To do this we'll place both a long and a short trigger with a BUY at 39.09 and a SELL short trigger at 36.05. When one of the orders is filled, cancel the remaining order and enter a 3.04 trailing stop. When you've reached a 3.38 paper profit, tighten the stop to 1.52. CLDX closed at 37.55 on Thursday. Earnings Report Date: Aug 6, 2024. Beta: 1.58. Market-Cap: 2.475B. Optionable.

INDUSTRIALS SECTOR

Huron Consulting Group Inc. (HURN: Industrials/Consulting Services) - NEW HIGH DIP. After setting a recent new 52-week high, HURN shares have since fallen from that peak as traders put some profits in the bank. Thursday's intra-day bounce may very signal that the recent decline is over. Prepare for a continuation of this turnaround and "buy-the-dip" if HURN reaches our BUY trigger set at 115.06. Follow your entry with a trailing stop of 10.75, and tighten to 5.38 on a 4.44 gain. HURN closed Thursday at 112.35. Earnings Report Date: Oct 31, 2024. Beta: 0.61. Market-Cap: 1.999B. Optionable.

TECHNOLOGY SECTOR

EchoStar Corporation (SATS: Technology/Communication Equipment) - BULLISH BOUNCE. Among other strengths, the Bullish Bounce protects traders from buying a stock "at the top" of its current cycle. The entry into this setup always takes place in upward-moving stocks that have retreated a bit under normal conditions. Now sitting at 19.95, SATS is on our radar for a BUY entry at 20.48. If you purchase shares of SATS, be sure to also place a trailing stop of 1.79. Snug it up to 0.9 on a 1.34 gain. Earnings Report Date: Aug 6, 2024. Beta: 0.71. Market-Cap: 5.42B. Optionable.

IMPORTANT: Before entering any positions, always use the Risk Control System to determine the level of acceptable risk and the maximum number of shares to buy. Use Gap Adjusted Entries to reset the Entry Price for stocks that gap beyond recommended entry levels.

Stock Splits

Below are the stocks that have announced splits and have recently executed or will execute soon. There is generally a return to normal price behavior in the weeks following a split announcement in what we call a "Dormancy Phase." As the stock nears its split execution date (Effective Date) it often moves into the "Pre-Split Run" stage where quick and sometimes dramatic gains can occur.

                             Announce     Eff.       Split
Company Name     (Symbol)      Date       Date       Ratio   Options  
---------------- -------     --------    -------     ------  -------   

NOTE: The number of stock split announcments goes up during Bull markets, 
and goes down during Bear market cycles. There are currently no upcoming 
stock splits that meet RightLine's proprietary criteria for split ratio, 
trading volume and price action.      

Split details are also available online at the RightLine Online Stock Split Calendar. For a detailed look at the different stages of a Stock Split, Click Here.

A simple yet powerful tool, the Risk Control Calculator helps you manage risk by recommending a maximum number of shares to purchase. Available in the RightLine Member's Area.

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